Pakistan: Imported scrap market yet to recover from economic instability; steel demand still sluggish

Pakistan's imported ferrous scrap market is currently experiencing a sluggish phase with minimal container bookings. Prices have been fluctuating due to the differences between bids and offers. This week, a few bookings of containerised material were made at the $400-410/t level. Last week, approximately 10,000-12,000 t of containerised shredded scrap were reportedly booked.

"Ahead of the Muharram month, the market is slow. Additionally, electricity tariff is likely to increase, which will again lead to higher cost of production," said a reliable mill person.

"The market position is the same as last week, there is no change. Still, very weak demand was observed," another scrap buyer informed.

Current offers for shredded scrap from the UK are at $408/t CFR Qasim, down slightly by $2/t w-o-w.

Domestic market overview

• Rebar prices decline: In the domestic market, deformed grade-60 rebar (10-12 mm) prices decreased by PKR 5,000-7,000/t ($18-25/t) w-o-w to PKR 240,000-242,000/t ($849-856/t) exw, inclusive of taxes. Local scrap (shredded) offers also declined to PKR 171,500-172,500/t ($607-610/t) exy.
  
  

Buyers noticed no major changes in demand, but the fluctuation in imported offers may be attributed to the recent International Monetary Fund (IMF) deal, which strengthened the Pakistani Rupee (PKR) against the US dollar. However, the current market scenario suggests that this trend may not last if the economy does not support the steel industry. Steel producers planning capacity expansion are reportedly facing losses.

At the time of compiling the report, the PKR weakened to 282 against the US dollar, down by PKR 6 w-o-w.

"Demand has reduced due to the rainy season and the fact that buyers are expecting a big fall in steel prices as the dollar became slightly weak now after the IMF deal. People expect PKR to get more strong though it was trading over PKR 280 against the dollar. Things are not clear here," a major mill person informed.

• China gives $600 million after IMF deal: China has also rolled over a $600 million loan to Pakistan, strengthening the country's foreign exchange reserves following the IMF deal. The IMF bailout of $3 billion, disbursed on 30 June, along with financial support from Saudi Arabia ($2 billion) and the UAE ($1 billion) after the IMF pact, have helped stabilise the economy.
  
  
• PSAA sought govt intervention: The Pakistan Ship Agents Association (PSAA) has requested government intervention to resume duty-free imports of spare parts for visiting vessels. This measure is necessary to ensure the continuity of Pakistan's seaborne trade by allowing the clearance of ship's spare parts in transit for foreign shipping lines. Such practices were in place at the KPT, Port Qasim, and Gwadar, the three international seaports.
  
  

Outlook

After the IMF deal, other countries like China, Saudi Arabia, and UAE also helped Pakistan to stablise the disrupted economy. While the imported scrap market trend is expected to remain on a downtrend in the near term, trade activities might pick up only if buyers would go for imported material to fulfill their upcoming demand for finished steel in the market.